Correlation Between Adidas AG and Samsonite International

Can any of the company-specific risk be diversified away by investing in both Adidas AG and Samsonite International at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Adidas AG and Samsonite International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Adidas AG ADR and Samsonite International SA, you can compare the effects of market volatilities on Adidas AG and Samsonite International and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Adidas AG with a short position of Samsonite International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adidas AG and Samsonite International.

Diversification Opportunities for Adidas AG and Samsonite International

-0.75

Correlation Coefficient

Adidas AG  Samsonite International

Pay attention - limited upside

The 3 months correlation between Adidas and Samsonite is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Adidas AG ADR and Samsonite International SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samsonite International and Adidas AG is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Adidas AG ADR are associated (or correlated) with Samsonite International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Samsonite International has no effect on the direction of Adidas AG i.e., Adidas AG and Samsonite International go up and down completely randomly.

Pair Corralation between Adidas AG and Samsonite International

Assuming the 90 days horizon Adidas AG ADR is expected to generate 0.57 times more return on investment than Samsonite International. However, Adidas AG ADR is 1.75 times less risky than Samsonite International. It trades about 0.12 of its potential returns per unit of risk. Samsonite International SA is currently generating about -0.36 per unit of risk. If you would invest  12,100  in Adidas AG ADR on March 12, 2024 and sell it today you would earn a total of  375.00  from holding Adidas AG ADR or generate 3.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Adidas AG ADR  vs.  Samsonite International SA

Adidas AG ADR

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Adidas AG ADR are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Adidas AG showed solid returns over the last few months and may actually be approaching a breakup point.

Samsonite International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Samsonite International SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in July 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Adidas AG and Samsonite International

The main advantage of trading using opposite Adidas AG and Samsonite International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adidas AG position performs unexpectedly, Samsonite International can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Samsonite International will offset losses from the drop in Samsonite International's long position.

The idea behind Adidas AG ADR and Samsonite International SA pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.